Wyoming energy cooperatives prepare for savings…

More than eight years ago, New Mexico’s Kit Carson Electric Cooperative became the first electric distribution cooperative to cut ties with the Tri-State Generation and Transmission Association, a massive cooperative with member organizations in a four-state territory that includes parts of Wyoming.

As Kit Carson has delayed filing its 2023 financial report, internal discussions among Wyoming co-ops have resumed with a recurring theme: the grass isn’t necessarily greener on the other side.

“This characterization that we are losing money is incorrect,” said Luis Reyes Jr., CEO of Kit Carson Electric Cooperative Inc., who defended his cooperative.

“We’re operating on a budget,” Reyes told the Cowboy State Daily.

Since 2016, several co-ops have followed in Kit Carson’s footsteps, sparking even more rumors among critics that things are not looking good for those who paid millions of dollars to leave Tri-State.

Complaints about those who left Tri-State also centered on paying more for wholesale electricity purchased from an outside company, Denver-based Guzman Energy Group. Critics say Kit Carson and other cooperatives that left Tri-State are now paying more for electricity, and Guzman may not have enough capacity to fulfill its electricity promises in future years.

A spokeswoman for Guzman could not immediately comment on the matter.

The largest utility, Brighton, Colo.-based United Power Inc., said it accounted for about 20% of Tri-State’s revenue when she left in May, and its top executive recently told the Cowboy State Daily that everything is fine with his independence.

“The opportunity to purchase and transmit our own power was very attractive,” said United Power President and CEO Mark Gabriel.

Other co-ops in Colorado and Nebraska have also signaled they will withdraw next year.

Others still say it’s a thing of the past.

Jerry Thompson, chairman of the board of Garland Light & Power Co. in Powell, Wyoming, recently wrote in an email to Cowboy State Daily that Wyoming cooperatives “are pleased that United Power is no longer part of Tri-State.”

Thompson said legal battles with United Power to combat “extreme renewables and the all-for-nothing agenda” are taking up Tri-State’s time and resources.

“It might be worth looking at how some of the other (Kit Carson) co-ops are doing financially,” he said.

Rating agencies that monitor the debt levels of these co-ops have mixed feelings about the near-junk status of Tri-State’s credit loans.

The major rating agencies, S&P and Fitch Ratings, say there is no danger of Tri-State going bankrupt due to its more than $2.6 billion in debt, especially thanks to United Power, which paid an exit fee of $702 million to sever ties with Tri-State.

Challenges Ahead of Us

However, both S&P and Fitch say the energy transition to decarbonize the electricity generation portfolio comes with challenges ahead, largely due to Colorado’s efforts to transition to renewable energy in the coming decades.

“Survival is not an issue for us,” said Dennis Pidherny, managing director of public finance at Fitch Ratings in New York.

Pidherny told Cowboy State Daily that Tri-State’s service area stretches from Wyoming to New Mexico and that the company is grappling with different concepts for generating electricity and transmitting electrons to customers via transmission lines.

“There are very different needs and goals, and there have been schisms among the membership about what transmission and generation should look like,” Pidherny said. “That has created some tension and discussion among the membership. They’re trying to get a membership that’s more cohesive or on the same page, where everyone basically shares the same worldview.”

He added that United Power’s departure highlighted some of those rifts.

“The United Power exit was expensive,” Pidherny said. “They paid $702 million to exit, and Tri-State can now reduce its debt and pay off its obligations. They hope to get to a point where members who really want to leave will have a formula approved by the regulations that will allow members to buy themselves out of the cooperative and go their own way.”

“United’s departure was cost-related. If you ask them, it was more about the power philosophy and the fact that they wanted to explore their renewable resource base. Their members really wanted that, and that’s why they paid a little more to leave.”

S&P credit analyst David Bodek said his rating agency views FERC’s termination compensation formula as a potential disincentive for new member distribution cooperatives to sever ties with Tri-State.

According to Bodek, Tri-State’s board said it will use the proceeds from the exit fee to pay part of a five-year $2.6 billion capital improvement plan and to reduce its existing $3.4 billion in debt by about 13%.

100% renewable

There are eight Tri-State member cooperatives in Wyoming that have openly expressed their views on the issue. Preservation of the coal-fired Laramie River Station one of the last coal-fired power plants in the Cowboy State with no plans to close.

Wyoming-based cooperatives with offices in the three states are: Big Horn Rural Electric Co. in Basin; Carbon Power & Light Inc. in Saratoga; Garland Light & Power Co. in Powell; High Plains Power Inc. in Riverton; High West Energy Inc. in Pine Bluffs; Niobrara Electric Association Inc. in Lusk; Wheatland Rural Electric Association; and Wyrulec Co., based in Torrington.

Although LRS has no plans to close any of its three units, other coal-fired power plants in Wyoming are in various stages of closure, including the 816-megawatt Dave Johnston Generating Station in Glenrock and the 1,162-megawatt Jim Bridger Generating Station in Point of Rocks.

Besides Tri-State, LRS is jointly owned by other cooperatives in the region, including Basin Electric, so any decisions about the plant’s future would have to be made jointly.

Late financial statements

Reyes confirmed that his organization is late in filing its 2023 financial report with the New Mexico Public Regulation Corp., but is still generating a profit from its energy transition.

“Today we are 100% renewable,” said Reyes, who pointed out that his cooperative plans to file its 2023 financial report with its New Mexico regulator this week. “We’re doing well.”

Reyes believes some cooperatives have reservations about his cooperative because it is doing well financially.

“We left Tri-State because I couldn’t convince them to go renewable,” he said. “I’m not that concerned about what they’re doing. If they decide coal is good for them, great. Don’t impose your beliefs on me.”

Reyes told the Cowboy State Daily that his co-op paid back Tri-State its $37 million exit fee in less than six years.

“I think they’re shortsighted,” Reyes said of Tri-State members. “They’re not making decisions about what’s best for their members, but rather what’s best for their board or their manager.

Kit Carson has requested two “waivers” to delay its 2023 report submission to the New Mexico regulator due to “auditor scheduling conflicts” in examining the services and businesses Kit Carson offers, including electricity, propane and utilities, according to copies of the waivers obtained by Cowboy State Daily.

Energy transformation alone is not an obstacle for Tri-State and its members.

Combining Power

Tri-State, Kit Carson and Wyoming co-ops are looking for ways to save money.

This summer, the Southwest Power Pool (SPP) filed with FERC to form the first regional transmission organization (RTO) in the United States, which would provide service on both the eastern and western connections of the national grid.

Currently headquartered in Little Rock, Arkansas, SPP covers 14 states, including Arkansas, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas and Wyoming.

The addition of new members will lower the wholesale costs of delivering electricity through the electric grid to utilities and purchasers in these states. The new members added to the RTO will ensure the reliability of the electric grid and save utilities money.

The planned launch of the joint power plant is April 1, 2026. It is estimated that the connection with the western part of the USA will result in savings of USD 200 million per year.

Some of the groups seeking to join the RTO through Wyoming ties include Basin Electric Power Cooperative, Tri-State, the Western Area Power Administration, a power trading agency that has access to government dams, United Power, billionaire Warren Buffett’s PacifiCorp, which operates the Rocky Mountain Power plant in Wyoming, and Francis E. Warren Air Force Base in Cheyenne, where demand for electricity is expected to increase as it modernizes its strategic nuclear arsenal.

“It’s a big deal,” said Bruce Rew, senior vice president of operations at SPP Inc., who is overseeing the RTO expansion effort.

Rew said the expansion will primarily target Colorado and Wyoming and represents a 10 percent increase in SPP’s market size.

“This is a good opportunity for customers in Wyoming to access a broader market offering lower-cost energy,” he said.

Pat Maio you can contact us at [email protected].